ITLA CAPITAL CORPORATION EMPLOYEE STOCK INCENTIVE PLAN INCENTIVE STOCK OPTION AGREEMENT

EXHIBIT 10.1

ITLA CAPITAL CORPORATION

2005 RE-DESIGNATED, AMENDED AND RESTATED

EMPLOYEE STOCK INCENTIVE PLAN

INCENTIVE STOCK OPTION AGREEMENT

ISO NO. ___

This option is granted on _________, 200_ (the "Grant Date") by ITLA Capital Corporation (the "Corporation") to ______________________ (the "Optionee"), in accordance with the following terms and conditions:

         1. Option Grant and Exercise Period. The Corporation hereby grants to the Optionee an Incentive Stock Option (the "Option") to purchase, pursuant to the Corporation's 2005 Re-Designated, Amended and Restated Employee Stock Incentive Plan, as the same may be from time to time amended (the "Plan"), and upon the terms and conditions therein and hereinafter set forth, an aggregate of ______ shares (the "Option Shares") of the Common Stock, par value $.01 per share ("Common Stock"), of the Corporation at the price (the "Exercise Price") of $______ per share. A copy of the Plan, as currently in effect, is incorporated herein by reference and is attached hereto. Capitalized terms used but not defined in this Agreement shall have the meanings assigned to them in the Plan.

         This Option shall be exercisable only during the period (the "Exercise Period") commencing on the dates set forth below and ending at 5:00 p.m., La Jolla, California time, on the date ten years after Grant Date, such later time and date being hereinafter referred to as the "Expiration Date," subject to Section 5 below. Except as provided in Section 7 below, this Option shall vest and become exercisable according to the following schedule:

Date of
Vesting Amount of
Initial
Award Vested

During the Exercise Period, only the vested portion of this Option shall be exercisable in whole at any time or in part from time to time subject to the provisions of this Agreement, and further subject to the condition that the aggregate Fair Market Value (as defined in the Plan and as determined as of the Grant Date) of the shares of Common Stock with respect to which Incentive Stock Options (as defined in the Plan) are exercisable for the first time by the Optionee in any calendar year shall not exceed One Hundred Thousand Dollars ($100,000.00). To the extent that this Option, or any part hereof, does not qualify as an Incentive Stock Option for any reason, it shall become a Non-Qualified Stock Option under the Plan.

         2. Method of Exercise of This Option. This Option may be exercised during the Exercise Period by giving written notice to the Corporation specifying the number of Option Shares to be purchased. The notice must be in the form prescribed by the committee referred to in Section 4 of the Plan or its successor (the "Committee") and directed to the address set forth in Section 10 below. The date of exercise is the date on which such notice is received by the Corporation. Such notice must be accompanied by payment in full of the Exercise Price for the Option Shares to be purchased upon such exercise. Payment shall be made in one of the following ways: (i) in cash, which may be in the form of a check, bank draft, or money order payable to the Corporation; (ii) in Common Stock valued at its Fair Market Value on the date of exercise; (iii) by a combination of (i) and (ii); (iv) by having shares withheld from the total number of shares of Common Stock to be delivered upon exercise; or (v) by delivering a properly executed notice together with irrevocable instructions to a broker to promptly deliver to the Corporation the amount of sale or loan proceeds to pay the exercise price.

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         3. Non-Transferability of This Option. This Option may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, except, in the event of the death of the Optionee, by will or the laws of descent and distribution. This Option is exercisable during the Optionee's lifetime only by the Optionee. The provisions of this Option shall be binding upon, inure to the benefit of and be enforceable by the parties hereto, the successors and assigns of the Corporation and any person to whom this Option is transferred by will or by the laws of descent and distribution.

         4. Restrictions on Stock Transferability. The Committee shall impose such restrictions on any shares of Common Stock acquired pursuant to the exercise of this Option as it may deem advisable, including, without limitation, restrictions under applicable federal securities law, under the requirements of any stock exchange, stock market or quotation system on which such shares of Common Stock are then listed and under any blue sky or state securities laws applicable to such shares.

         5. Early Termination of Options. Except as provided in this Section 5 and notwithstanding any other provision of this Option to the contrary, this Option shall not be exercisable unless the Optionee, at the time he exercises this Option, has remained continuously in the employ of the Corporation or any Affiliate of the Corporation (as described in the Plan) since the Grant Date.

         If the Optionee shall cease to be employed by the Corporation or any Affiliate of the Corporation for any reason (excluding death, Disability, Retirement and termination of employment by the Corporation or any Affiliate of the Corporation for cause), this Option will continue to vest and will remain exercisable for three months immediately succeeding such cessation of employment or until the Expiration Date, whichever period is shorter, at the end of which period this Option shall terminate. If the Optionee shall cease to be employed by the Corporation or any Affiliate of the Corporation because of termination of employment by the Corporation or any Affiliate of the Corporation for cause, this Option shall terminate and all rights under this Option shall expire immediately upon the giving to the Optionee of notice of such termination.

         If the Optionee shall cease to be employed by the Corporation or any Affiliate of the Corporation by reason of death or Disability, this Option will continue to vest and will remain exercisable (in the case of the death of the Optionee, by the person to whom this Option is transferred by will or the laws of descent and distribution) for one year immediately succeeding such cessation of employment or until the Expiration Date, whichever period is shorter, at the end of which period this Option shall terminate.

         If the Optionee shall cease to be employed by the Corporation or any Affiliate of the Corporation by reason of Retirement, this Option will continue to vest and will remain exercisable for six months immediately succeeding such cessation of employment or until the Expiration Date, whichever period is shorter, at the end of which period this Option shall terminate.

         The Optionee understands that under federal income tax laws as in effect as of the date of this Agreement, this Option will cease to qualify as an Incentive Stock Option under Section 422 of the Code if this Option is exercised more than three months following termination of employment due to Retirement.

         6. Adjustments for Changes in Capitalization of the Corporation. In the event of any change in the outstanding shares of Common Stock by reason of any stock dividend or split, recapitalization, merger, consolidation, combination, exchange of shares, or other similar corporate change, the aggregate number of shares of Common Stock subject to this Option and the Exercise Price shall be adjusted appropriately by the Committee, whose determination shall be conclusive; provided, however, that fractional shares shall be rounded to the nearest whole share.

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         7. Change in Control. In the event of a change in control (as defined in the Plan), this Option shall vest 100% and shall, to the extent it is not theretofore exercisable, be immediately exercisable; provided, however, that that this Option shall not become exercisable to the extent it has previously been exercised or otherwise terminated.

         8. Stockholder Rights Not Granted by This Option. The Optionee is not entitled by virtue hereof to any rights of a stockholder of the Corporation or to notice of meetings of stockholders or to notice of any other proceedings of the Corporation.

         9. Withholding Tax. Upon the exercise of this Option, the Corporation shall have the right to require the Optionee or such other person as is entitled to exercise this Option to pay to the Corporation the amount of any taxes which the Corporation or any Affiliate of the Corporation is required to withhold with respect to such Option Shares, or, in lieu thereof, to retain, or sell without notice, a sufficient number of such shares to cover the amount required to be withheld or in lieu of any of the foregoing, to withhold a sufficient sum from the Optionee's compensation payable by the Corporation or any Affiliate of the Corporation to satisfy such withholding requirements. The Corporation's method of satisfying its withholding obligations shall be solely in the discretion of the Corporation, subject to applicable federal, state and local law.

         10. Notices. All notices hereunder to the Corporation shall be delivered or mailed to it addressed to the Secretary of the Corporation at 000 Xxxxxxxx Xxxxxx, Xxxxx 000, Xx Xxxxx, Xxxxxxxxxx 00000. Any notices hereunder to the Optionee shall be delivered personally or mailed to the Optionee's address noted below. Such addresses for the service of notices may be changed at any time provided written notice of the change is furnished in advance to the Corporation or to the Optionee, as the case may be.

         11. Notice of Sale. The Optionee or any person to whom this Option shall have been transferred pursuant to Section 3 shall give notice to the Secretary of the Corporation at the address set forth in Section 10 above in the event of the sale or other disposition of Option Shares within the later of (i) two years from the Grant Date or (ii) one year from the date of exercise of this Option. Such notice shall be given no later than 15 days from the date or dates of such sale or other disposition and the consideration received, if any. Upon notification from the Corporation, the Optionee or any person to whom this Option shall have been transferred pursuant to Section 3 shall promptly forward to the Secretary of the Corporation any amount requested by the Corporation for the purpose of satisfying its liability, if any, to withhold federal, state or local income or earnings tax or any other applicable tax or assessment (plus interest or penalties thereon, if any, caused by delay in making such payment) incurred by reason of such disposition.

         12. Plan and Plan Interpretations as Controlling. This Option and the terms and conditions herein set forth are subject in all respects to the terms and conditions of the Plan, which are controlling. All determinations and interpretations of the Committee shall be binding and conclusive upon the Optionee or his legal representatives with regard to any question arising hereunder or under the Plan.

         13. Optionee Service. Nothing in this Option shall limit the right of the Corporation or any of its Subsidiaries to terminate the Optionee's service as an officer or employee, or otherwise impose upon the Corporation or any of its Subsidiaries any obligation to employ or accept the services of the Optionee.

         14. Optionee Acceptance. The Optionee shall signify his acceptance of the terms and conditions of this Option by signing in the space provided below and returning a signed copy hereof to the Corporation at the address set forth in Section 10 above.

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         IN WITNESS WHEREOF, the parties hereto have caused this INCENTIVE STOCK OPTION AGREEMENT to be executed as of the date first above written.

ITLA CAPITAL CORPORATION

By:

ACCEPTED:




(Name of Optionee)


(Street Address)


(City, State and Zip Code)

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